TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

Investment in agricultural land and
inclusive business models 1
1. Introduction
This chapter falls into two parts. First, it describes
the policy framework and recent trends in
large-scale agricultural investments in Zambia.
Then, it examines two agricultural investment
case studies: Kaleya Smallholders Company Ltd
(Kascol) and Mpongwe Development Company
Ltd (MDC). The latter went into voluntary
liquidation in 2006 and its farms were bought
up by ETC BioEnergy and another investor. At
the time of the study, ETC Bioenergy sold the
farms to another company, Zambeef. 2 Though
liquidated in 2006, MDC continued to exist until
20 July 2011 when it was finally deregistered
by the Registrar of companies. Neither
investment project belongs to the recent wave of
agricultural investments that has attracted much
international attention over the past few years.
Indeed, the two projects started in the 1970s
and early 1980s as joint ventures between the
Government of Zambia and the Commonwealth
Development Corporation (CDC), and have been
privatized in recent years. The involvement of
the CDC reflected the development orientation
of both projects at their inception. Given this
circumstance and given the implementation
time behind these two experiences, the case
studies provide valuable insights on the longer-
1 This chapter is based on an original research report
produced for FAO by Fison Mujenja, RuralNet Associates
Ltd
2 In this chapter, name references are made to both the
Mpongwe Development Company and ETC BioEnergy,
with a preference for the Mpongwe Development
Company whenever reference is being made to events
before 2007, and ETC BioEnergy when referring to
events after 2007. The name Mpongwe Development
Company is used in cases where events cut across the
two periods.
term development outcomes of best practice
agricultural investments. These insights may be
a useful contribution to today’s international
debates about agricultural investment.
Despite their similar historical roots, the two
case studies are rather different. Kascol is an
agribusiness company operating in Mazabuka
district, in Zambia’s Southern Province. It is a
single-product company that produces sugar
cane on a farm situated about 8 km south of
Mazabuka, the main town in Mazabuka District.
The sugar cane is sold to Zambia Sugar Company,
which mills the cane into sugar for the local
and export markets. According to the latest
annual report of the Zambia Sugar Company,
sugar exports to the European Union make up
62 percent of total sales, while the rest is sold
in the local market (ZSC, 2011). Interviews with
Zambia Sugar Company management indicated
that sugar is also being exported to a number of
countries inside Africa. Kascol started operating in
1980 and holds about 4 314.9 hectares of land,
of which 2 265.3 hectares are fully developed
and under cultivation. Kascol’s approach to
business is a combination of own-production and
contract farming on land held by the company.
Land is held as a 99-year lease, and Kascol
subleases about 1 000 hectares of this land to
about 160 outgrowers on the basis of 14-year
renewable contracts. The model also involves
equity participation and board representation for
smallholder outgrower farmers: an organization
of the outgrowers holds 13 percent of the equity
in the company, and a district-level, sugar-cane
grower association holds an additional 25 percent
equity.
The ETC BioEnergy company (formerly
Mpongwe Development Company, MDC),
runs plantations for a total of 46 874 hectares
in Mpongwe District, in Zambia’s Copperbelt
Province. The total landholding consists of
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